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CNN Live At Daybreak

Latest on Iraqi Prisoner Abuse Scandal; Federal Reserve's Plan to Raise Interest Rates This Summer

Aired May 10, 2004 - 05:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


CAROL COSTELLO, CNN ANCHOR: A crowded market, a deadly bombing -- is it the beginning of another bad week in Baghdad?
It is Monday, May 10.

This is DAYBREAK.

And good morning to you.

From the CNN global headquarters in Atlanta, I'm Carol Costello.

Here are the latest headlines for you now.

A marketplace explosion kills five Iraqis in the Baghdad suburb of Sadr City. It comes as coalition forces step up operations against radical Shiite cleric Muqtada al-Sadr.

President Bush heads to the Pentagon later this morning for a briefing on the military situation in Iraq, plus the latest in that prison abuse scandal.

A three day hearing for Kobe Bryant begins today. The NBA star is expected to plead not guilty to sexual assault. That plea could come Wednesday. A trial could begin late this summer.

Lung cancer has claimed the life of comedian Alan King. King appeared on the old "Ed Sullivan Show" 93 times. Comedian Jerry Stiller says King was like a Jewish Will Rogers. Alan King was 76 years old.

To the forecast center now and Chad -- good morning.

CHAD MYERS, CNN CORRESPONDENT: Good morning, Carol.

(WEATHER REPORT)

COSTELLO: The ugly pictures scandal just won't go away. We could be seeing more of those unsettling photographs of Iraqi prisoners this week. And more hearings are scheduled on Capitol Hill tomorrow into the prison abuse scandal.

We begin our coverage this morning with our Elaine Quijano.

(BEGIN VIDEOTAPE)

ELAINE QUIJANO, CNN CORRESPONDENT (voice-over): This time, the picture shows a naked Iraqi detainee at Abu Ghraib prison, cowering, surrounded by what appear to be Americans in uniform with dogs at their sides.

"The New Yorker" magazine published the photo, along with another article by journalist Seymour Hersh, in which he says the evidence suggests cameras were part of the interrogation process to gain leverage.

SEYMOUR HERSH, THE NEW YORKER: To threaten a prisoner with taking these photographs and showing them to neighbors or showing them to others, it would be a greater source of humiliation that others actually see the problems he had in prison.

A senior Pentagon official says the pictures are all evidence in an ongoing investigation. Lawmakers may get the chance to privately view yet unseen photos. The chairman of the Senate Armed Services Committee, Republican John Warner says the committee is working with the Pentagon in advance of a Tuesday hearing.

SEN. JOHN WARNER (R), VIRGINIA: How much they could be made public remains to be seen, but the Pentagon is certainly at this point in time cooperating with us in putting our hearing together.

QUIJANO: Family, friends, and an attorney for one of the accused, Specialist Charles Grainer, say the soldiers acted not on their own, but at the direction of superiors in military intelligence.

GUY WOMACK, SPC. CHARLES GRAINER'S ATTY.: I've only seen about seven photos. And those were ones that he was ordered to have taken.

QUIJANO: The Pentagon continues to investigate. The CIA is due to finish its own report on the abuse allegations in two to three weeks, according to Republican Senator Pat Roberts, who chairs the Senate Intelligence Committee. And now, one of the seven accused, Specialist Jeremy Sivits, faces a bad conduct discharge and is said to be court martialed May 19.

BRIG. GEN. MARK KIMMITT, U.S. MILITARY SPOKESMAN: The three charges against Specialist Sivits are conspiracy to maltreat subordinates and detainees, dereliction of duty for negligently failing to protect detainees from abuse, cruelty and maltreatment, and maltreatment of detainees.

QUIJANO (on camera): The military says the court martial will take place at coalition headquarters in Baghdad and will be open to the media. It's part of the Pentagon's effort to make transparent especially in the Arab world, the process of meting out American military justice.

Elaine Quijano, CNN, the Pentagon.

(END VIDEOTAPE)

COSTELLO: And Jeremy Sivits' court martial is set for May 19th.

Our Alina Cho traveled to the soldier's hometown in southwestern Pennsylvania for reaction to the charges against him.

(BEGIN VIDEOTAPE)

ALINA CHO, CNN CORRESPONDENT (voice-over): Mike Fleagle says he stands behind Specialist Jeremy Sivits 100 percent.

MIKE FLEAGLE: Bring him home. Let's pin a medal on him and have a parade. They drug our kids through the streets, behind jeeps. They burn them. They hung them from a bridge. And why are we held higher standards than they are? We're at war.

CHO: Daughter Heather went to the prom with him. She says Sivits was so proud of being a soldier, he wore his uniform to the dance.

HEATHER FLEAGLE, DAUGHTER: And he told me ahead of time that he was going to wear his uniform.

CHO: And you said?

H. FLEAGLE: I said that was fine with me.

CHO: Because?

H. FLEAGLE: Because all guys look good in uniforms.

CHO: This small Pennsylvania town openly shows its support for the troops, with most of the support these days going to Jeremy Sivits. Sivits will stand trial in Baghdad on May 19. A world away...

M. FLEAGLE: The boy's a good boy.

CHO (on camera): Both Sivits mother and father told CNN commenting on the case right now would only hurt their son. The community says it could do without all of this attention and says the prison scandal in Iraq is hitting a bit too close to home.

Alina Cho, CNN, southwestern Pennsylvania.

(END VIDEOTAPE)

COSTELLO: And in all, six members of the military police face criminal charges. Ivan and Jo Ann Frederick, the parents of Sergeant Chip Frederick, one of those charged, appears in the 7:00 a.m. Eastern time hour of "American Morning" with Bill and Soledad.

President Bush heads to the Pentagon later this morning for a briefing. He's expected to make some remarks and CNN, of course, will bring those remarks to you live. And that begins at 11:30 Eastern, 8:30 Pacific time.

Tony Blair is apologizing for any abuses by British soldiers in Iraq. The British prime minister appeared on French television.

(BEGIN VIDEO CLIP) TONY BLAIR, BRITISH PRIME MINISTER: We apologize deeply to anyone who has been mistreated by any of our soldiers. That is absolutely and totally unacceptable. I just want people to know that I have spoken to a number of British soldiers out there who are working night and day to help the Iraqis rebuild their infrastructure, get a better way of life and be treated properly. We went to Iraq to end those type of abuses, not to engage in them.

(END VIDEO CLIP)

COSTELLO: Britain's defense ministry is investigating 33 reports of British abuse of Iraqi prisoners. And Britain's parliament plunges into the Iraq prisoner abuse scandal later today. Defense Minister Geoffrey Hune will be grilled about who knew what and when. Sounds familiar, doesn't it?

CNN's Robin Oakley live from London now to tell us more.

How will this work?

ROBIN OAKLEY, CNN CORRESPONDENT: Well, exactly as you say, Carol. It's a repetition, really, of what we've seen in the U.S. already. Geoffrey Hune, the defense secretary, will face very sharp questioning from M.P.s when he makes a statement about the situation in Iraq and the possible abuse of Iraqi detainees by British troops.

As you say, the Ministry of Defense already says that 33 cases of alleged abuse are being investigated. In 15 of those, British troops have been cleared and in just six cases so far, there is a possibility of prosecutions following.

Now, because the International Committee of the Red Cross and Amnesty International have been saying that they started telling the British government about potential abuses a year ago and that they've done so on several instances since then, there is going to be real pressure on Mr. Hune to explain exactly what the British government knew and when.

Michael Ancram, the spokesman for the opposition Conservatives, says Mr. Hune has got to come clear and make it clear to M.P.s as to whether there's been any degree of cover-up. Certainly Downing Street, Tony Blair's office, have said that they knew of reports from February onwards. Though, Adam Ingram, one of the defense ministers, said he knew of no such reports from outside investigators -- Carol.

COSTELLO: The other interesting facet of this, the "Daily Mirror" is going to be interviewed by parliament, too?

OAKLEY: Indeed. The "Daily Mirror," which has published photographs of alleged abuse by British forces personnel of Iraqi detainees. Its editor, Piers Morgan, is going to be quizzed by a committee of M.P.s about the extent of the evidence which the "Daily Mirror" has for these allegations.

It's all part of the ongoing picture of considerable pressure on the British government. There is considerable public dismay at the revelations and the fear that the whole basis of Britain's participation in the Iraq war and the standards it claims to stand for is being undermined by these allegations of abuse. And it's also starting to react against the government in the sense that the latest opinion poll by NOP for "The Independent" newspaper says that 55 percent now want British troops out of Iraq by June the 30th -- Carol.

COSTELLO: Robin Oakley live in London this morning.

In news across America this morning, in Maine, seven people, including four children, are dead following a high speed crash. All seven were in an SUV that flipped over while passing other cars on the shoulder. It's Maine's worst highway crash in 50 years.

Pretrial hearings begin at Fort Bragg today in the case of an Army sergeant charged with killing two fellow soldiers in Kuwait. Sergeant Hassan Akbar is accused of tossing several grenades into a group of soldiers. The attack came during the first days of the war in Iraq. If he's found guilty, Akbar could face the death penalty.

High winds and hail hit parts of Minnesota. As many as eight tornadoes and funnel clouds reported throughout the western and central parts of the state. Trees and houses were damaged by the storm activity, but no serious injuries have been reported.

You're on notice -- if you're thinking about refinancing or buying a house, time is running out. We're going to have some details for you.

Plus...

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: OK, when I fire, you go.

(END VIDEO CLIP)

COSTELLO: The day hell broke loose. It happened in the fight for Falluja. We will take you to the front lines on this deadly day.

Also ahead, Italy's anti-terror experts break up a cell that may have been planning suicide attacks in Iraq. We'll have a live report for you.

And the potentially deadly mix of teenagers, cell phones and cars.

All that and much more coming up in this hour of DAYBREAK.

(COMMERCIAL BREAK)

COSTELLO: Your news, money, weather and sports.

It is 5:13 Eastern.

Here's what's all new this morning. U.S. aircraft bombed the Sadr City office of Muslim Shiite cleric Muqtada al-Sadr in Baghdad early today. No comment from the military on any casualties. The bombing is part of a stepped up campaign against an uprising launched by al-Sadr.

President Bush will head across the Potomac River to the Pentagon for a briefing today. It comes as the outrage over photos of Iraqi prisoner abuse keeps boiling. But the visit was planned before the scandal broke.

In money news, gasoline prices keep pumping up. They've gone up $0.10 a gallon in just the past two weeks. The average price of a gallon of self-serve regular nationwide stands at $1.93.

In sports, the Los Angeles Lakers ripped the San Antonio Spurs 105-81 in game three of the NBA's Western Conference Semifinals. The loss snaps the Spurs' 17 game winning streak and cuts their lead to two games to one.

In culture, it's nail biting time on Broadway. The Tony Awards nominations will be announced this morning at 8:30 Eastern. Hugh Jackman is the favorite for best actor in a musical for "The Boy from Oz" -- Chad.

MYERS: Carol, hi.

(WEATHER REPORT)

COSTELLO: Those are the latest headlines for you.

The word is out on Wall Street -- interest rates are likely to go up. Some analysts are saying the Fed will raise interest rates this summer, possibly as early as next month.

Our Kathleen Hays has more for you.

(BEGIN VIDEOTAPE)

KATHLEEN HAYS, CNN CORRESPONDENT (voice-over): The Federal Reserve put the world on notice this week -- it's getting ready to raise interest rates to fight inflation. So don't just sit there, do something. Because soon any kind of credit is going to get more expensive, starting with the mortgage on your home.

ANTHONY CHAN, BANKONE: I think the last two employment reports should be a wake up call to anyone that is thinking of buying a house or refinancing. Long-term interest rates, they're not going down. In fact, they're probably going to continue to inch higher from here. So if you're thinking about refinancing, yesterday was the day to do it. If you didn't do it yesterday, then today is the day to do it.

HAYS: As of last week, average 30 year mortgage rates had already topped six percent. And if the Federal Reserve starts raising interest rates in late June, mortgage rates could hit seven percent or higher by next year. That means higher monthly mortgage payments that could price some buyers out of the market. But even if you can still afford a new house in the suburbs, you may not be able to afford that shiny new car to make the commute every day. Did you think those rich incentives and zero percent financing rates were going to last forever?

JARED BERNSTEIN, ECONOMIC POLICY INSTITUTE: All that will fade. I just think that those were all the very aggressive measures taken by the Fed and by sectors throughout the financial markets to try to stimulate what was a pretty weak economy from the perspective of demand.

HAYS (on camera): And investors, don't forget to take a look at the stocks and mutual funds in your 401K. If interest rates rise, interest sensitive cyclical stocks like banks and home builders will take a back seat to defensive sectors like household products and drugs.

Kathleen Hays, CNN Financial News, New York.

(END VIDEOTAPE)

COSTELLO: The latest Gallup poll, by the way, taken early last week, shows 51 percent of Americans feel the economy is getting worse. Forty-three percent say it's getting better. The poll was taken before the government released figures on Friday showing a surge in hiring and a drop in the unemployment rate.

And it does look like fears of higher interest rates is affecting U.S. and overseas markets.

For more on that, let's head live to London and Todd Benjamin -- good morning, Todd.

TODD BENJAMIN, CNN CORRESPONDENT: Good morning, Carol.

Absolutely right. That surge in employment on Friday, a much bigger jobs picture than the markets had anticipated, really taking the wind out of the sails of these European markets this Monday.

Right now, the FTSE is down just over one and a half percent. And it's doing better than the other major European markets.

The DAX in Frankfurt is off nearly three percent, 2.8 percent, right now.

And the CAC in Frankfurt is off better than two percent.

Everybody, of course, fearing higher interest rates in the U.S. And the fear is if the Fed continues to tighten, as many people expect it will starting in June, that could slow growth and that would be bad for European exports.

Most people feel that the Fed funds rate -- that's a key rate for the Fed, now at one percent, which is abnormally low -- will be at least two percent by the end of the year. And, of course, higher rates have a knock on effect, as we heard from Kathleen, on what you pay for autos and certainly for mortgage rates. As Kathleen was pointing out, those mortgage rates could be seven percent or higher next year.

So it's been a great party, but now people are worried about the hangover -- back to you.

COSTELLO: What a nice way -- well, not really a nice way to put it, but clever.

Todd Benjamin live from London this morning.

Next on DAYBREAK, they say curiosity killed the cat. We'll tell you about what could have been a FedEx feline fiasco. It's a cat's tale you will not believe.

Plus...

(BEGIN VIDEO CLIP FROM "VAN HELSING")

UNIDENTIFIED MALE: Really?

(END VIDEO CLIP)

COSTELLO: Oh, things that go bump in the night dominated the weekend box office. We'll tell you why a creature slayer and his crew made the big screen scene.

(COMMERCIAL BREAK)

COSTELLO: Welcome back to DAYBREAK.

MYERS: Welcome back.

COSTELLO: It's 5:22 Eastern time.

It's that time we get to share, oh, some news of the bizarre.

MYERS: Something. News of the weird, if you will. This lady bites into a hot dog and she swallows it without chewing it and she swallows a bullet.

COSTELLO: A live bullet.

MYERS: Or so she says. It reminds me of my...

COSTELLO: No, look, she has the x-ray to prove it. It's in her stomach. There it is.

MYERS: That doesn't mean it was in the hot dog. It kind of sounds to me like Bob and Doug McKenzie. Remember that? You know, they'd put the mouse in the beer so they can get a free case.

COSTELLO: Look, there's...

MYERS: How are you going to chew that? COSTELLO: No. She was eating the hot dog and she must not have chewed that first piece. But then she bit into a second bullet. This happened in Irvine, California, by the way.

MYERS: And then the police came and chopped up all the other hot dogs and found nothing.

COSTELLO: She bought a hot dog at Costco. So they did, they chopped up -- and you know the big packages at Costco, so that was a lot of hot dogs.

MYERS: Oh, I thought she bought it there, you know, because you can buy food to go there, buy food to eat there. Oh, she -- oh, she...

COSTELLO: Yes, she bought it there. Let me make sure because I don't want to like...

MYERS: I don't, we don't know whether she bought it -- it does not say. It doesn't say whether she actually bought it in a package or bought it to go, because they the pizza, a little stand. You don't go to Costco, I do.

COSTELLO: That's a --

MYERS: I get my 14 gallons of olive oil and I head out the door, you know?

COSTELLO: A very strange story. We just thought we'd share that for you, because it's Monday and we knew you needed something like that.

MYERS: Yes.

COSTELLO: Time for our DAYBREAK Eye-Opener now.

No one has stepped up to claim Saturday's $213 million Power Ball prize. A single winning ticket was purchased in eastern Pennsylvania. The winner will have to decide whether to take the full amount spread out over 29 years or take a lump sum payment of $110 million and some change, minus all the taxes, of course.

FedEx has a fur ball. A Connecticut woman accidentally sent one of her 12 cats to Indiana and she sent it in the FedEx box. The cat had climbed into a furniture box, Chad, before it was sealed and sent.

MYERS: This lady swallow a bullet?

COSTELLO: A bullet. Right. Luckily, the woman noticed she was one cat short of a dozen and she called FedEx.

MYERS: She's one French fry short of a Happy Meal, too. Oh, god.

COSTELLO: Two days later, Chad, the cat was returned home no worse for the wear, but maybe a little less curious. MYERS: Oh, it looks like a nice cat.

(BEGIN VIDEO CLIP FROM "VAN HELSING")

UNIDENTIFIED FEMALE: I don't need any help.

UNIDENTIFIED MALE: Really?

(END VIDEO CLIP)

COSTELLO: "Van Helsing" took flight over the weekend and finished big at the box office. The Hugh Jackman thriller made more than $54 million. The other highly anticipated debut was the Mary- Kate and Ashley movie. But the Olsen twins finished a disappointing fourth in the final tally.

And here's what's all new in the next half hour of DAYBREAK.

Are cell phones, teenagers and cars a bad mix? Oh, I know what you're saying. We'll have the latest on that for you ahead.

Plus...

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: When I fire, you go.

(END VIDEO CLIP)

COSTELLO: The front lines of Falluja -- one of our own puts his life on the line to bring the war to a TV near you. We'll take a peek at Karl Penhaul's reporter's notebook.

This is DAYBREAK for Monday.

(BEGIN VIDEOTAPE)

GARRY BETTY, PRESIDENT & CEO, EARTHLINK, INC.: Well, if you listen to your customers, they'll tell you what things bug them.

UNIDENTIFIED MALE: Customer satisfaction -- that's Earthlink's top priority, and their more than five million subscribers seem to agree. Ranked number three among Internet service providers behind AOL, CNN's sister company, and MSN, Earthlink rose from humble beginnings, with only 30,000 subscribers eight years ago.

Much of its success can be attributed to leader Garry Betty. BETTY: Listening and decision-making are key. I think the ability to handle a lot of diverse tasks and at the same time being able to filter out extraneous things from your ability to focus on those things that are important to making your business run are important, as well.

(END VIDEOTAPE)

(COMMERCIAL BREAK) COSTELLO: More humiliating pictures could be coming out of that prison in Baghdad. That as President Bush heads to the Pentagon for a briefing this morning.

It is Monday, May 10.

This is DAYBREAK.

And good morning to you.

Welcome to the second half hour of DAYBREAK.

From CNN's global headquarters in Atlanta, I'm Carol Costello.

Let me bring you up to date now.

A U.S. bomb attack virtually destroys the Baghdad headquarters of radical cleric Muqtada al-Sadr. The blast came just hours after 19 militia members were killed in clashes with U.S. troops in the area.

President Bush gets a military briefing today. It comes as his defense secretary is being criticized for his handling of the Iraqi prisoner abuse scandal.

British Defense Secretary Geoffrey Hune is expected to face questions about prisoner abuse when he appears before the House of Commons this morning. Last week, a British newspaper printed photos showing British soldiers brutalizing an Iraqi prisoner.

And today marks the beginning of National Police Week. For 42 years, this week has been set aside to honor law enforcement. The week ends with Peace Officers Memorial Day on may 15.

Now to the forecast center and Chad.

(WEATHER REPORT)

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Aired May 10, 2004 - 05:00   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL COSTELLO, CNN ANCHOR: A crowded market, a deadly bombing -- is it the beginning of another bad week in Baghdad?
It is Monday, May 10.

This is DAYBREAK.

And good morning to you.

From the CNN global headquarters in Atlanta, I'm Carol Costello.

Here are the latest headlines for you now.

A marketplace explosion kills five Iraqis in the Baghdad suburb of Sadr City. It comes as coalition forces step up operations against radical Shiite cleric Muqtada al-Sadr.

President Bush heads to the Pentagon later this morning for a briefing on the military situation in Iraq, plus the latest in that prison abuse scandal.

A three day hearing for Kobe Bryant begins today. The NBA star is expected to plead not guilty to sexual assault. That plea could come Wednesday. A trial could begin late this summer.

Lung cancer has claimed the life of comedian Alan King. King appeared on the old "Ed Sullivan Show" 93 times. Comedian Jerry Stiller says King was like a Jewish Will Rogers. Alan King was 76 years old.

To the forecast center now and Chad -- good morning.

CHAD MYERS, CNN CORRESPONDENT: Good morning, Carol.

(WEATHER REPORT)

COSTELLO: The ugly pictures scandal just won't go away. We could be seeing more of those unsettling photographs of Iraqi prisoners this week. And more hearings are scheduled on Capitol Hill tomorrow into the prison abuse scandal.

We begin our coverage this morning with our Elaine Quijano.

(BEGIN VIDEOTAPE)

ELAINE QUIJANO, CNN CORRESPONDENT (voice-over): This time, the picture shows a naked Iraqi detainee at Abu Ghraib prison, cowering, surrounded by what appear to be Americans in uniform with dogs at their sides.

"The New Yorker" magazine published the photo, along with another article by journalist Seymour Hersh, in which he says the evidence suggests cameras were part of the interrogation process to gain leverage.

SEYMOUR HERSH, THE NEW YORKER: To threaten a prisoner with taking these photographs and showing them to neighbors or showing them to others, it would be a greater source of humiliation that others actually see the problems he had in prison.

A senior Pentagon official says the pictures are all evidence in an ongoing investigation. Lawmakers may get the chance to privately view yet unseen photos. The chairman of the Senate Armed Services Committee, Republican John Warner says the committee is working with the Pentagon in advance of a Tuesday hearing.

SEN. JOHN WARNER (R), VIRGINIA: How much they could be made public remains to be seen, but the Pentagon is certainly at this point in time cooperating with us in putting our hearing together.

QUIJANO: Family, friends, and an attorney for one of the accused, Specialist Charles Grainer, say the soldiers acted not on their own, but at the direction of superiors in military intelligence.

GUY WOMACK, SPC. CHARLES GRAINER'S ATTY.: I've only seen about seven photos. And those were ones that he was ordered to have taken.

QUIJANO: The Pentagon continues to investigate. The CIA is due to finish its own report on the abuse allegations in two to three weeks, according to Republican Senator Pat Roberts, who chairs the Senate Intelligence Committee. And now, one of the seven accused, Specialist Jeremy Sivits, faces a bad conduct discharge and is said to be court martialed May 19.

BRIG. GEN. MARK KIMMITT, U.S. MILITARY SPOKESMAN: The three charges against Specialist Sivits are conspiracy to maltreat subordinates and detainees, dereliction of duty for negligently failing to protect detainees from abuse, cruelty and maltreatment, and maltreatment of detainees.

QUIJANO (on camera): The military says the court martial will take place at coalition headquarters in Baghdad and will be open to the media. It's part of the Pentagon's effort to make transparent especially in the Arab world, the process of meting out American military justice.

Elaine Quijano, CNN, the Pentagon.

(END VIDEOTAPE)

COSTELLO: And Jeremy Sivits' court martial is set for May 19th.

Our Alina Cho traveled to the soldier's hometown in southwestern Pennsylvania for reaction to the charges against him.

(BEGIN VIDEOTAPE)

ALINA CHO, CNN CORRESPONDENT (voice-over): Mike Fleagle says he stands behind Specialist Jeremy Sivits 100 percent.

MIKE FLEAGLE: Bring him home. Let's pin a medal on him and have a parade. They drug our kids through the streets, behind jeeps. They burn them. They hung them from a bridge. And why are we held higher standards than they are? We're at war.

CHO: Daughter Heather went to the prom with him. She says Sivits was so proud of being a soldier, he wore his uniform to the dance.

HEATHER FLEAGLE, DAUGHTER: And he told me ahead of time that he was going to wear his uniform.

CHO: And you said?

H. FLEAGLE: I said that was fine with me.

CHO: Because?

H. FLEAGLE: Because all guys look good in uniforms.

CHO: This small Pennsylvania town openly shows its support for the troops, with most of the support these days going to Jeremy Sivits. Sivits will stand trial in Baghdad on May 19. A world away...

M. FLEAGLE: The boy's a good boy.

CHO (on camera): Both Sivits mother and father told CNN commenting on the case right now would only hurt their son. The community says it could do without all of this attention and says the prison scandal in Iraq is hitting a bit too close to home.

Alina Cho, CNN, southwestern Pennsylvania.

(END VIDEOTAPE)

COSTELLO: And in all, six members of the military police face criminal charges. Ivan and Jo Ann Frederick, the parents of Sergeant Chip Frederick, one of those charged, appears in the 7:00 a.m. Eastern time hour of "American Morning" with Bill and Soledad.

President Bush heads to the Pentagon later this morning for a briefing. He's expected to make some remarks and CNN, of course, will bring those remarks to you live. And that begins at 11:30 Eastern, 8:30 Pacific time.

Tony Blair is apologizing for any abuses by British soldiers in Iraq. The British prime minister appeared on French television.

(BEGIN VIDEO CLIP) TONY BLAIR, BRITISH PRIME MINISTER: We apologize deeply to anyone who has been mistreated by any of our soldiers. That is absolutely and totally unacceptable. I just want people to know that I have spoken to a number of British soldiers out there who are working night and day to help the Iraqis rebuild their infrastructure, get a better way of life and be treated properly. We went to Iraq to end those type of abuses, not to engage in them.

(END VIDEO CLIP)

COSTELLO: Britain's defense ministry is investigating 33 reports of British abuse of Iraqi prisoners. And Britain's parliament plunges into the Iraq prisoner abuse scandal later today. Defense Minister Geoffrey Hune will be grilled about who knew what and when. Sounds familiar, doesn't it?

CNN's Robin Oakley live from London now to tell us more.

How will this work?

ROBIN OAKLEY, CNN CORRESPONDENT: Well, exactly as you say, Carol. It's a repetition, really, of what we've seen in the U.S. already. Geoffrey Hune, the defense secretary, will face very sharp questioning from M.P.s when he makes a statement about the situation in Iraq and the possible abuse of Iraqi detainees by British troops.

As you say, the Ministry of Defense already says that 33 cases of alleged abuse are being investigated. In 15 of those, British troops have been cleared and in just six cases so far, there is a possibility of prosecutions following.

Now, because the International Committee of the Red Cross and Amnesty International have been saying that they started telling the British government about potential abuses a year ago and that they've done so on several instances since then, there is going to be real pressure on Mr. Hune to explain exactly what the British government knew and when.

Michael Ancram, the spokesman for the opposition Conservatives, says Mr. Hune has got to come clear and make it clear to M.P.s as to whether there's been any degree of cover-up. Certainly Downing Street, Tony Blair's office, have said that they knew of reports from February onwards. Though, Adam Ingram, one of the defense ministers, said he knew of no such reports from outside investigators -- Carol.

COSTELLO: The other interesting facet of this, the "Daily Mirror" is going to be interviewed by parliament, too?

OAKLEY: Indeed. The "Daily Mirror," which has published photographs of alleged abuse by British forces personnel of Iraqi detainees. Its editor, Piers Morgan, is going to be quizzed by a committee of M.P.s about the extent of the evidence which the "Daily Mirror" has for these allegations.

It's all part of the ongoing picture of considerable pressure on the British government. There is considerable public dismay at the revelations and the fear that the whole basis of Britain's participation in the Iraq war and the standards it claims to stand for is being undermined by these allegations of abuse. And it's also starting to react against the government in the sense that the latest opinion poll by NOP for "The Independent" newspaper says that 55 percent now want British troops out of Iraq by June the 30th -- Carol.

COSTELLO: Robin Oakley live in London this morning.

In news across America this morning, in Maine, seven people, including four children, are dead following a high speed crash. All seven were in an SUV that flipped over while passing other cars on the shoulder. It's Maine's worst highway crash in 50 years.

Pretrial hearings begin at Fort Bragg today in the case of an Army sergeant charged with killing two fellow soldiers in Kuwait. Sergeant Hassan Akbar is accused of tossing several grenades into a group of soldiers. The attack came during the first days of the war in Iraq. If he's found guilty, Akbar could face the death penalty.

High winds and hail hit parts of Minnesota. As many as eight tornadoes and funnel clouds reported throughout the western and central parts of the state. Trees and houses were damaged by the storm activity, but no serious injuries have been reported.

You're on notice -- if you're thinking about refinancing or buying a house, time is running out. We're going to have some details for you.

Plus...

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: OK, when I fire, you go.

(END VIDEO CLIP)

COSTELLO: The day hell broke loose. It happened in the fight for Falluja. We will take you to the front lines on this deadly day.

Also ahead, Italy's anti-terror experts break up a cell that may have been planning suicide attacks in Iraq. We'll have a live report for you.

And the potentially deadly mix of teenagers, cell phones and cars.

All that and much more coming up in this hour of DAYBREAK.

(COMMERCIAL BREAK)

COSTELLO: Your news, money, weather and sports.

It is 5:13 Eastern.

Here's what's all new this morning. U.S. aircraft bombed the Sadr City office of Muslim Shiite cleric Muqtada al-Sadr in Baghdad early today. No comment from the military on any casualties. The bombing is part of a stepped up campaign against an uprising launched by al-Sadr.

President Bush will head across the Potomac River to the Pentagon for a briefing today. It comes as the outrage over photos of Iraqi prisoner abuse keeps boiling. But the visit was planned before the scandal broke.

In money news, gasoline prices keep pumping up. They've gone up $0.10 a gallon in just the past two weeks. The average price of a gallon of self-serve regular nationwide stands at $1.93.

In sports, the Los Angeles Lakers ripped the San Antonio Spurs 105-81 in game three of the NBA's Western Conference Semifinals. The loss snaps the Spurs' 17 game winning streak and cuts their lead to two games to one.

In culture, it's nail biting time on Broadway. The Tony Awards nominations will be announced this morning at 8:30 Eastern. Hugh Jackman is the favorite for best actor in a musical for "The Boy from Oz" -- Chad.

MYERS: Carol, hi.

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COSTELLO: Those are the latest headlines for you.

The word is out on Wall Street -- interest rates are likely to go up. Some analysts are saying the Fed will raise interest rates this summer, possibly as early as next month.

Our Kathleen Hays has more for you.

(BEGIN VIDEOTAPE)

KATHLEEN HAYS, CNN CORRESPONDENT (voice-over): The Federal Reserve put the world on notice this week -- it's getting ready to raise interest rates to fight inflation. So don't just sit there, do something. Because soon any kind of credit is going to get more expensive, starting with the mortgage on your home.

ANTHONY CHAN, BANKONE: I think the last two employment reports should be a wake up call to anyone that is thinking of buying a house or refinancing. Long-term interest rates, they're not going down. In fact, they're probably going to continue to inch higher from here. So if you're thinking about refinancing, yesterday was the day to do it. If you didn't do it yesterday, then today is the day to do it.

HAYS: As of last week, average 30 year mortgage rates had already topped six percent. And if the Federal Reserve starts raising interest rates in late June, mortgage rates could hit seven percent or higher by next year. That means higher monthly mortgage payments that could price some buyers out of the market. But even if you can still afford a new house in the suburbs, you may not be able to afford that shiny new car to make the commute every day. Did you think those rich incentives and zero percent financing rates were going to last forever?

JARED BERNSTEIN, ECONOMIC POLICY INSTITUTE: All that will fade. I just think that those were all the very aggressive measures taken by the Fed and by sectors throughout the financial markets to try to stimulate what was a pretty weak economy from the perspective of demand.

HAYS (on camera): And investors, don't forget to take a look at the stocks and mutual funds in your 401K. If interest rates rise, interest sensitive cyclical stocks like banks and home builders will take a back seat to defensive sectors like household products and drugs.

Kathleen Hays, CNN Financial News, New York.

(END VIDEOTAPE)

COSTELLO: The latest Gallup poll, by the way, taken early last week, shows 51 percent of Americans feel the economy is getting worse. Forty-three percent say it's getting better. The poll was taken before the government released figures on Friday showing a surge in hiring and a drop in the unemployment rate.

And it does look like fears of higher interest rates is affecting U.S. and overseas markets.

For more on that, let's head live to London and Todd Benjamin -- good morning, Todd.

TODD BENJAMIN, CNN CORRESPONDENT: Good morning, Carol.

Absolutely right. That surge in employment on Friday, a much bigger jobs picture than the markets had anticipated, really taking the wind out of the sails of these European markets this Monday.

Right now, the FTSE is down just over one and a half percent. And it's doing better than the other major European markets.

The DAX in Frankfurt is off nearly three percent, 2.8 percent, right now.

And the CAC in Frankfurt is off better than two percent.

Everybody, of course, fearing higher interest rates in the U.S. And the fear is if the Fed continues to tighten, as many people expect it will starting in June, that could slow growth and that would be bad for European exports.

Most people feel that the Fed funds rate -- that's a key rate for the Fed, now at one percent, which is abnormally low -- will be at least two percent by the end of the year. And, of course, higher rates have a knock on effect, as we heard from Kathleen, on what you pay for autos and certainly for mortgage rates. As Kathleen was pointing out, those mortgage rates could be seven percent or higher next year.

So it's been a great party, but now people are worried about the hangover -- back to you.

COSTELLO: What a nice way -- well, not really a nice way to put it, but clever.

Todd Benjamin live from London this morning.

Next on DAYBREAK, they say curiosity killed the cat. We'll tell you about what could have been a FedEx feline fiasco. It's a cat's tale you will not believe.

Plus...

(BEGIN VIDEO CLIP FROM "VAN HELSING")

UNIDENTIFIED MALE: Really?

(END VIDEO CLIP)

COSTELLO: Oh, things that go bump in the night dominated the weekend box office. We'll tell you why a creature slayer and his crew made the big screen scene.

(COMMERCIAL BREAK)

COSTELLO: Welcome back to DAYBREAK.

MYERS: Welcome back.

COSTELLO: It's 5:22 Eastern time.

It's that time we get to share, oh, some news of the bizarre.

MYERS: Something. News of the weird, if you will. This lady bites into a hot dog and she swallows it without chewing it and she swallows a bullet.

COSTELLO: A live bullet.

MYERS: Or so she says. It reminds me of my...

COSTELLO: No, look, she has the x-ray to prove it. It's in her stomach. There it is.

MYERS: That doesn't mean it was in the hot dog. It kind of sounds to me like Bob and Doug McKenzie. Remember that? You know, they'd put the mouse in the beer so they can get a free case.

COSTELLO: Look, there's...

MYERS: How are you going to chew that? COSTELLO: No. She was eating the hot dog and she must not have chewed that first piece. But then she bit into a second bullet. This happened in Irvine, California, by the way.

MYERS: And then the police came and chopped up all the other hot dogs and found nothing.

COSTELLO: She bought a hot dog at Costco. So they did, they chopped up -- and you know the big packages at Costco, so that was a lot of hot dogs.

MYERS: Oh, I thought she bought it there, you know, because you can buy food to go there, buy food to eat there. Oh, she -- oh, she...

COSTELLO: Yes, she bought it there. Let me make sure because I don't want to like...

MYERS: I don't, we don't know whether she bought it -- it does not say. It doesn't say whether she actually bought it in a package or bought it to go, because they the pizza, a little stand. You don't go to Costco, I do.

COSTELLO: That's a --

MYERS: I get my 14 gallons of olive oil and I head out the door, you know?

COSTELLO: A very strange story. We just thought we'd share that for you, because it's Monday and we knew you needed something like that.

MYERS: Yes.

COSTELLO: Time for our DAYBREAK Eye-Opener now.

No one has stepped up to claim Saturday's $213 million Power Ball prize. A single winning ticket was purchased in eastern Pennsylvania. The winner will have to decide whether to take the full amount spread out over 29 years or take a lump sum payment of $110 million and some change, minus all the taxes, of course.

FedEx has a fur ball. A Connecticut woman accidentally sent one of her 12 cats to Indiana and she sent it in the FedEx box. The cat had climbed into a furniture box, Chad, before it was sealed and sent.

MYERS: This lady swallow a bullet?

COSTELLO: A bullet. Right. Luckily, the woman noticed she was one cat short of a dozen and she called FedEx.

MYERS: She's one French fry short of a Happy Meal, too. Oh, god.

COSTELLO: Two days later, Chad, the cat was returned home no worse for the wear, but maybe a little less curious. MYERS: Oh, it looks like a nice cat.

(BEGIN VIDEO CLIP FROM "VAN HELSING")

UNIDENTIFIED FEMALE: I don't need any help.

UNIDENTIFIED MALE: Really?

(END VIDEO CLIP)

COSTELLO: "Van Helsing" took flight over the weekend and finished big at the box office. The Hugh Jackman thriller made more than $54 million. The other highly anticipated debut was the Mary- Kate and Ashley movie. But the Olsen twins finished a disappointing fourth in the final tally.

And here's what's all new in the next half hour of DAYBREAK.

Are cell phones, teenagers and cars a bad mix? Oh, I know what you're saying. We'll have the latest on that for you ahead.

Plus...

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: When I fire, you go.

(END VIDEO CLIP)

COSTELLO: The front lines of Falluja -- one of our own puts his life on the line to bring the war to a TV near you. We'll take a peek at Karl Penhaul's reporter's notebook.

This is DAYBREAK for Monday.

(BEGIN VIDEOTAPE)

GARRY BETTY, PRESIDENT & CEO, EARTHLINK, INC.: Well, if you listen to your customers, they'll tell you what things bug them.

UNIDENTIFIED MALE: Customer satisfaction -- that's Earthlink's top priority, and their more than five million subscribers seem to agree. Ranked number three among Internet service providers behind AOL, CNN's sister company, and MSN, Earthlink rose from humble beginnings, with only 30,000 subscribers eight years ago.

Much of its success can be attributed to leader Garry Betty. BETTY: Listening and decision-making are key. I think the ability to handle a lot of diverse tasks and at the same time being able to filter out extraneous things from your ability to focus on those things that are important to making your business run are important, as well.

(END VIDEOTAPE)

(COMMERCIAL BREAK) COSTELLO: More humiliating pictures could be coming out of that prison in Baghdad. That as President Bush heads to the Pentagon for a briefing this morning.

It is Monday, May 10.

This is DAYBREAK.

And good morning to you.

Welcome to the second half hour of DAYBREAK.

From CNN's global headquarters in Atlanta, I'm Carol Costello.

Let me bring you up to date now.

A U.S. bomb attack virtually destroys the Baghdad headquarters of radical cleric Muqtada al-Sadr. The blast came just hours after 19 militia members were killed in clashes with U.S. troops in the area.

President Bush gets a military briefing today. It comes as his defense secretary is being criticized for his handling of the Iraqi prisoner abuse scandal.

British Defense Secretary Geoffrey Hune is expected to face questions about prisoner abuse when he appears before the House of Commons this morning. Last week, a British newspaper printed photos showing British soldiers brutalizing an Iraqi prisoner.

And today marks the beginning of National Police Week. For 42 years, this week has been set aside to honor law enforcement. The week ends with Peace Officers Memorial Day on may 15.

Now to the forecast center and Chad.

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